U.S. Opinion Poll Says China Should Worry About Currency, Not Trade Deficit

From Bloomberg.com

By a margin of 50% to 26%, Americans say China should be allowed to proceed at its own pace. The poll, conducted jointly by Bloomberg News and the Los Angeles Times, also indicated that making the yuan flexible was more important than being forced to make changes to reduce the trade gap with the U.S

That view contrasts with the atmosphere and rhetoric in the U.S. Congress, where at least 15 legislative measures have been introduced in the past year addressing trade and currency issues with China. Senators Charles Schumer and Lindsey Graham are among politicians who say China is keeping the yuan artificially weak to increase exports.

“China is on its way to being an economic giant,” said Rick Haverman, a 46-year-old high school history teacher in Spokane Washington, who participated in the poll. “That trumps the trade deficit, which I see as more of a short-term problem.”

Americans are also supportive of foreign investment in the U.S., with nearly 7 in 10 saying overseas companies should be allowed to put money into some areas of the economy, according to the survey of 1,357 adults conducted from April 8 to April 11. The margin of sampling error is plus or minus 3%age points.
The news isn't all good for overseas companies looking to do business in the U.S. Fifty-one% said some restrictions on investment are more important than the jobs such investments create.

“Global Engagement”
The conclusions suggest Congress may be less likely to impose penalties on China, given the lack of public support. Exports, including to the U.S., helped China’s economy vault ahead of the U.K. in the fourth quarter to become the world's fourth largest.

The U.S. trade deficit swelled to a record $726 billion last year, including a shortfall of $202 billion with China. The overall gap narrowed in February from the previous month, the Commerce Department said yesterday.

“There is broad public support for global engagement, not global withdrawal,” said Tom Mann, a congressional scholar at the Brookings Institution in Washington.

Economic Prosperity
Haverman's attitude, typical of many respondents contacted after the poll, probably reflects current economic prosperity, says Nicholas Lardy, a senior fellow at the Institute for International Economics in Washington. The U.S jobless rate matched a four-year low of 4.7% in March and the Conference Board's measure of consumer confidence climbed to the highest since 2002.

“We're at almost record-low unemployment, so the trade deficit isn't perceived to be weighing on jobs like it was a few years ago,” said Lardy, author of six books on Chinese economics and government policy.
The value of the yuan will likely be discussed by President George W. Bush and Chinese President Hu Jintao when Hu arrives in Washington next week. Bush has chosen to tread lightly on the topic, while Congress has been pressing him to force the issue.

A Senate bill sponsored by Schumer, a Democrat from New York, and Graham, a South Carolina Republican, would impose 27.5% tariffs on Chinese imports unless the yuan rises. They delayed a vote on their bill until September.

Ties With China
As for American attitudes on U.S.-China relations, “the two things aren't contradictory,” Schumer wrote in an e-mail yesterday in response to questions. “A good relationship with China in part depends on their willingness to stop manipulating their currency.”

The yuan had the biggest two-day drop against the dollar since it was revalued in July. The currency weakened to 8.0191 per dollar at 3:30 p.m. in Shanghai, bringing its two-day loss to 0.18%. The yuan is a denomination of China's currency, the renminbi, and has gained 1.1% since the revaluation.

Another trade issue, foreign investment in the U.S., flared in Congress during February when Dubai-based DP World attempted to buy several U.S. port facilities. Opposition from Republicans and Democrats, citing national-security concerns and a lack of consultation, forced the firm to abandon the purchase.

One bill, introduced by House Armed Services Chairman Duncan Hunter of California, would require any company that owns or operates an asset deemed “critical infrastructure” by the defense secretary to be majority-owned by U.S. citizens.

Lines in the Sand
Only 16% of Americans say foreigners should be barred from investing in the U.S. At the same time, just one in 10 said foreigners should have carte blanche to buy whatever they want. Most said foreigners, including those in Arab countries, should be allowed to invest in “some areas” of the U.S. economy.

“I wouldn't want to eliminate foreign companies from investing in anything in the U.S.,” said Mckenzie Laurence, 26, a real estate broker in Jacksonville, North Carolina. “But there are certain lines in the sand I'd be more comfortable that they didn't cross.”

Laurence, who took part in the poll, said barring foreigners from defense-related industries would be prudent, as well as keeping them from dominating any single market.

“The U.S. needs to compete for foreign investment, because there are many other places to invest now,'' said George Nolen, chief executive officer of Siemens Corp., a unit of Siemens AG, Germany's largest engineering company. Siemens employees 70,000 people in the U.S.

Randall Eferson, 51, an oil company supervisor in Baton Rouge, Louisiana, said foreigners should be allowed to invest in whatever they want to, “as long as it goes through the proper review procedures.”

Job Creation
Jobs may also be the issue there, said Lardy. “There's a fairly widespread understanding that foreign investment in the U.S. helps create jobs,” he said.

Americans are slightly less amenable when the foreigners are Arabs. Twice as many said Arabs should be barred from investing in the U.S. as those who said foreigners in general ought to be excluded.

For most Americans, “English speakers from Australia are one type of investor, and those from the Middle East are another type of investor,” said Edwin Feo, co-chair of the Global Project Finance Department at law firm Milbank, Tweed, Hadley & McCloy LLP in Los Angeles, which represents foreign companies looking to invest in U.S. infrastructure.

Despite a general openness of Americans to foreign investment, Feo says he's seeing growing opposition after the failed DP World deal.